Every morning in the movie “Groundhog Day,” Bill Murray woke up to, “It’s cold outside today. It’s cold outside every day.” Individuals tracking the economy the last two years must empathize with Bill Murray’s unfortunate character Phil Connors. Although some signs of life occasionally appear, it has been a long economic winter.
After reaching a high of nearly 12,000 at the end of 1999, the Dow Jones Industrial Average has fallen to two-thirds of that value. In the same period, state unemployment rates have increased from 2.8 percent to 3.9 percent, reaching a high of 4.9 percent in January 2002. State revenue forecasts, optimistic and describing what to do with excess surpluses only two years ago, are now grim and discuss where to make up large deficits in the time ahead. As candidates are selected in the upcoming election, strong consideration should be paid to how they plan to endure the rest of the winter.
In 2002, Minnesota state legislators began to burn the floorboards in order to stay warm. The state faced a budget shortfall of $2.2 billion. Although some spending cuts were made and some taxes were increased, these permanent measures only made up 15 percent of the total fix. Instead, one-time actions – the depleting of state reserves and shifting the payment and collection dates of some monies – accounted for 85 percent of the shortfall balancing act. These measures will not be available in the next budget cycle which is currently projected to be at a $3.3 billion deficit under current law and spending levels.
In 2003 Minnesota will need a responsible long-term plan to tide itself over until the economy again turns positive. In an already pared-down government, further cuts should be approached with caution and only where clear surpluses exist. Then, higher revenue streams are necessary. Out of a total of $27.2 billion in state revenue, $19.3 billion came from individual income and sales taxes. To imagine the creation of a further $3.3 billion solely from the remaining streams of $6.1 billion is deceptive, unrealistic and irresponsible.
The question is not whether taxes will be raised under the next legislative watch. The only question is how much and on whom. In choosing your state legislators and Minnesota’s next governor, ensure they share your values so as not to be surprised over the next two years.
